ICAI-GST

August 2018 • Volume 02 • No. 5

NEWSLETTER
A Newsletter from The Institute of Chartered Accountants of India on GST

ICAI Proactively acting in the spirit of

Knowledge Partner for GST success
l Comprehensive publications and
dedicated newsletter on GST
l E-learning on GST and UAE VAT
l Scores of inputs/suggestions on GST
given to Government.
l Organised 70 batches of Certificate
Course on GST benefiting thousands of
members
l Developed expert pool of over 800 GST
faculties across India
l 3800 programmes, live webcasts, video
lectures and workshops on GST covering
over 3 lakh participants
The Council Contents
Ü President
 Update
CA. Naveen N. D. Gupta
1. GST updates 4-12
Ü Vice President
CA. Prafulla Chhajed  Articles

Ü CA. Anil Satyanarayan Bhandari 1. The Taxable Event in GST –

CA. Atul Kumar Gupta “Supply” 13-15
CA. Babu Abraham Kallivayalil
CA. Debashis Mitra
2. Offences and Penalty Provisions
CA. Dhinal Ashwinbhai Shah
CA. Dhiraj Kumar Khandelwal under GST 16-19
CA. G. Sekar
CA. Jay Ajit Chhaira 3. GST fermenting grounds for
CA. K. Sripriya
litigation? 20-23
CA. Kemisha Soni
CA. M. Devaraja Reddy
CA. M. P. Vijay Kumar  Forth Coming Events under the
CA. Madhukar Narayan Hiregange Aegis of Indirect Taxes Committee 24
CA. Mangesh Pandurang Kinare
CA. Manu Agrawal
CA. Mukesh Singh Kushwah
CA. Nandkishore Chidamber Hegde
CA. Nihar Niranjan Jambusaria
CA. Nilesh Shivji Vikamsey
CA. Prakash Sharma
CA. Rajesh Sharma
CA. Ranjeet Kumar Agarwal
CA. Sanjay Agarwal
CA. Sanjay Vasudeva
CA. Sanjiv Kumar Chaudhary
CA. Shiwaji Bhikaji Zaware
CA. Shyam Lal Agarwal
CA. Sushil Kumar Goyal
CA. Tarun Jamnadas Ghia
CA. Vijay Kumar Gupta
Shri K. V. R. Murty
Shri Sudhanshu Pandey
Shri Vithayathil Kurian Reach
Dr. Ravi Gupta Us
Shri Sunil Kanoria
Shri Chandra Wadhwa idtc@icai.in
Dr. P. C. Jain
Shri Vijay Kumar Jhalani
Ü
Disclaimer : The views and opinions expressed or implied in the ICAI-GST Newsletter are those of the authors and do not necessarily
reflect those of ICAI. Material in the publication may not be reproduced, whether in part or in whole, without the consent of ICAI.

2
ICAI GST Newsletter l August 2018
My Esteemed professional colleagues,
President’s Communication
GST (Amendment) Acts, 2018 have recently received the
President of India’s assent on August 29th, 2018 and
the changes proposed by these 4 Acts will be applicable
only from the date to be notified. However, that will be
possible only after enactment of SGST/UTGST Act by the
respective State/Union Territory Government. Primarily,
these amendments includes changes in the return provisions
to enable government to implement new proposed return
forms, restriction of reverse charge mechanism under Section
9(4) to specific class of registered person or goods and/or
services, increase in threshold limit for goods from Rs. 1
crore to Rs. 1.5 crores, modification in Blocked Credit of
ITC provisions, and concept of suspension of registration,
etc.
We also welcome the Government’s proactive decision to
exempt aid and relief materials from Basic Custom Duty
and Integrated Tax, which are imported as donation,
intended for people affected by the floods. Also, all the
registered persons in Kerala, Kodagu (Karnataka); Mahe
(Pondicherry) taken care by notifying the extension in the
due dates for filing of GST Returns.
We, at ICAI, with the aim to continueour initiatives to
support the Government and other stakeholders in GST, has
recently submitted 19 suggestions on draft proposed return
formats under GST to the Government.
ICAI GST Newsletter l August 2018
In addition to above, ICAI has come out with “E-Handbook
on Classification under GST”. This handbook inter-
alia cover many issues involved in classification exercise
including general rules and principles of classification.
Moreover, existing publication “Bare Law on GST”which
contain bird’s eye view of GST Law in addition to GST
Acts and Rules has also been updated to bring it in line
with the extant law. These publications are available in
soft copy at www.idtc.icai.org.
Continuing its knowledge dissemination drive, more than
5250 workshops, seminars/conferences on GST have been
organised by ICAI since 2017 with an aim to update our
members and stakeholders with the current developments in
GST. The same was attended by and benefited to almost 440
thousand participants. Further, 69 batches of Certificate
Course on GST have been organised across the country and
5 more batches have been scheduled.
ICAI takes pride in playing the desired role of partner-in
nation- building and taking various initiatives towards the
implementation of GST in India.
CA. Naveen N. D. Gupta
President, ICAI
3
 NEWS

GST updaTeS
Central Goods and Services tax (Tenth Amendment) dated 10th September, 2018 has notified following rules further
Rules, 2018- Form GSTR-9C notified to amend the Central Goods and Service Tax Rules, 2017.
The Central Government vide Notification No. 49 /2018 –CT Particulars Revised provision
dated 13th September, 2018 has notified “Part A- FORM GSTR- Insertion in New sub- rule (1A) has been inserted in Rule
9C - Reconciliation Statement and Part B-Certificate” to be Rule : 117 117 to provide that Notwithstanding anything
certified by the Chartered Accountants, which is applicable Tax or contained in sub-rule (1), the Commissioner
in case of taxable person whose aggregate turnover during a duty credit may, on the recommendations of the Council,
financial year exceeds Rs. 2 crore. It is required to be submitted carried extend the date for submitting the declaration
on or before 31st Dec, 2018. forward electronically in FORM GST TRAN-1 by a further
TD/TCS provisions effective from 1st October, 2018 under any period not beyond 31st March, 2019, in respect
The Central Government vide Notification No. 50 /2018 –CT existing of registered persons who could not submit the
dated 13th September, 2018 has notified 1st October, 2018, as law or on said declaration by the due date on account
goods held of technical difficulties on the common portal
the date on which the provisions of section 51 (Tax deducted at
in Stock and in respect of whom the Council has made a
source) will be effective with respect to a department of central/
on the recommendation for such extension.
state Government, local authority, governmental agencies and
appointed Remarks: With the insertion of this sub-rule
notified persons as specified below:
day. the Commissioner on the recommendations of
a) an authority or a board or any other body, - the Council may extend the date of submission
(i) set up by an Act of Parliament or a State Legislature; or of FORM GST TRAN-1 by a further period not
(ii) established by any Government, beyond 31st March, 2019.
with fifty-one per cent or more participation by way of New proviso has been inserted in sub-rule (4),
equity or control, to carry out any function; in clause (b), in sub-clause (iii) of Rule 117 to
provide that the registered persons filing the
b) Society established by the Central Government or the
declaration in FORM GST TRAN-1 in accordance
State Government or a Local Authority under the Societies
with newly inserted sub-rule (1A) may submit
Registration Act, 1860 (21 of 1860); the statement in FORM GST TRAN-2 by 30th
c) Public sector undertakings. April, 2019.
Therefore, w.e.f 1st Oct, 2018, above notified persons are Remarks: With the insertion of this proviso
required to deduct TDS @1% each in case of intra state and 2% persons filing Form GST TRAN-1 upto 31st
in case of interstate supply for total value of supply exceeding March, 2019 may submit the statement in
Rs. 2.5 Lacs under a contract and the amount so collected shall FORM GST TRAN-2 by 30th April, 2019.
be paid to the Government by the deductor within 10 days after [Notification No. 48 /2018 –CT dated 10th September, 2018]
the end of the month in which such deduction is made.
Return Filing
[Notification No. 50 /2018 –CT dated 13th September, 2018]
The Central Government vide Notification No. 43/2018 –
Also, the Central Government vide Notification No.51/2018
Central Tax; Notification No. 44/2018 – Central Tax dated 10th
– CT dated 13th September, 2018has notified 1st October,
September, 2018 has provided the time limits within which the
2018, as the date on which the provisions of section 52 (Tax
taxpayers shall furnish the Forms as specified in Column (2) of
collected at source) will be effective, which is applicable in case
the table below:
of e-commerce operator for supplies made through it by other
suppliers where the consideration with respect to such supplies Last date for
Sl. For the Month/
is to be collected by the operator. Form filing of return
No Quarter
Therefore, w.e.f 1st Oct, 2018, such e-commerce operators are (2) in FORM GSTR1
(1) (3)
required to deduct TCS at such rate not exceeding 1% as may be (4)
notified by the Government of net value of taxable supply and 1. GSTR 1 by the For each of the 31st October,
the amount so collected shall be paid to the Government by the taxpayers with month from July, 2018
operator within 10 days after the end of the month in which annual aggregate 2017 to September,
such collection is made. turnover of more 2018
[Notification No.51/2018 –CT dated 13th September, 2018] than Rs. 1.5 crore
For each of the 11th day of
Central Goods and Services tax (Ninth Amendment) months from the month
Rules, 2018 October, 2018 to succeeding such
The Central Government vide Notification No. 48 /2018 –CT March, 2019 month.

4
ICAI GST Newsletter l August 2018

2. GSTR 1 by the For each of the 31st October,
taxpayers with quarter from July, 2018
annual aggregate 2017 to September,
turnover upto 1.5 2018
crore
October- 31st January,
December, 2018 2019
January - March, 30th April, 2019
2018
However, GSTR-1 for the quarter from July, 2018 to September,
2018 by the registered persons in Kerala, Kodagu ( Karnataka);
Mahe ( Pondicherry) shall be furnished electronically through
the common portal, on or before the 15th day of November,
2018
[Notification No. 43/2018 – Central Tax, Notification No.
44/2018 – Central Tax dated 10th September, 2018]
Further, the Central Government vide Notification no. 45/2018-
CT, Notification no. 46/2018-CT dated 10th September, 2018
has provided that that the return in FORM GSTR-1/GSTR-3B to
be filed for the period from July, 2017 to November, 2018 by the
taxpayers who have obtained GSTIN through special procedure
prescribed vide Notification no. 31/2018-CT dated 6th August,
2018 for persons having provisional ID to get register w.e.f 1st
July, 2017 shall be furnished electronically through the common
portal on or before the 31st December, 2018.
[Notification no. 45/2018-CT, Notification no. 46/2018-CT dated
10th September, 2018]
E-way bill in case of storing of goods in godown of
transporter
The Central Government vide Circular No. 61/35/2018-GST
dated 4th September,2018 has clarified various issues faced
by transporters providing warehousing facilities due to which
they need to get themselves registered and maintain detailed
records.
In this regard an alternative method to escape from above
obligations has been provided where transporter’s godown can
be declared as an additional place of business by the recipient
taxpayer. On declaring transporter’s godown as the additional
place of business, the transportation under the e-way bill shall
be deemed to be concluded once the goods have reached the
transporter’s godown (recipient taxpayer additional place of
business). Hence, e-way bill validity in such cases will not be
required to be extended.
Further, the obligation of the transporter to maintain accounts
and records shall continue as a warehouse keeper. Furthermore,
as per rule 56 (7) of the CGST Rules, books of accounts in
relation to goods stored at the transporter’s godown (i.e.,
the recipient taxpayer’s additional place of business) by the
recipient taxpayer may be maintained by him at his principal
place of business. It may be noted that the facility of declaring
additional place of business by the recipient taxpayer is in no
way putting any additional compliance requirement on the
transporters.
[Circular No. 61/35/2018-GST dated 4th September, 2018]
ICAI GST Newsletter l August 2018
NEWS
Processing of refund applications filed by Canteen
Stores Department (CSD)
The Central Government vide Circular No. 60/34/2018-GST
dated 4th September, 2018 has provided a manner and
procedure for filing and processing of refund claims by CSD
which is explained as below:
Invoice-based refund: It is clarified that the instant refund to be
granted to the CSD is not for the accumulated input tax credit
but refund based on the invoices of the inward supplies of
goods received by them.
1. Manual filing of claims on a quarterly basis: the CSD are
required to apply for refund on a quarterly basis the CSD
shall apply for refund by filing an application in FORM GST
RFD-10A manually to the jurisdictional tax office which
shall be accompanied with prescribed documents
2. Processing and sanction of the refund claim: Upon receipt
of the complete application in FORM GST RFD-10A, an
acknowledgement shall be issued manually within 15 days
of the receipt of the application in FORM GST RFD-02 by the
proper officer. In case of any deficiencies in the requisite
documentary evidences the same shall be communicated
to the CSD by issuing a deficiency memo manually in FORM
GST RFD-03.
The proper officer may scrutinize:
• The details contained in FORM RFD-10A, FORM GSTR-
3B and FORM GSTR-2A.
• The proper officer should ensure that the amount of
refund sanctioned is 50 % of the taxes paid on the
supplies received by CSD.
3. Sanctioning of Refund: The proper officer shall issue the
refund sanction/rejection order manually in FORM GST
RFD-06 along with the payment advice manually in FORM
GST RFD-05 for each tax head separately.
Further, It is clarified that the CSD will apply for refund with the
jurisdictional Central tax/State tax authority to whom the CSD
has been assigned. However, the payment of the sanctioned
refund amount in relation to central tax / integrated tax shall
be made by the Central tax authority while payment of the
sanctioned refund amount in relation to State Tax / Union
Territory Tax shall be made by the State tax/Union Territory tax
authority.
[Circular No. 60/34/2018-GST dated 4th September, 2018]
Clarification on Refund related issues
The Central Government vide Circular No. 59/33/2018-GST
dated 4th September, 2018 has clarified various refund related
issues which are explained below:
Submission of invoices for processing of claims of refund: In
view of the difficulties being faced by the claimants in providing
invoices for processing of refund claims, it has been decided
that the refund claim shall be accompanied by a print-out of
FORM GSTR-2A of the claimant for the relevant period for
which the refund is claimed. In some situations, the proper
officer may call for the hard copies of invoices (not mentioned
5

in GSTR-2A due to some reason) if he deems it necessary for the
examination of the claim for refund. However, It is emphasized
that the proper officer shall not insist on the submission of an
invoice (either original or duplicate) the details of which are
present in FORM GSTR-2A of the relevant period submitted by
the claimant.
The claimant shall also submit the details of the invoices on
the basis of which input tax credit had been availed during
the relevant period for which the refund is being claimed in
Annexure-A manually along with the application for refund
claim in FORM GST RFD-01A .
System validations in calculating refund amount: Currently
the common portal is supposed to calculate the refund amount
following a prescribed procedure. However, the prescribed
procedure is not presently available on the common portal.
Therefore, till the time such facility is made available on the
common portal, the taxpayers are advised to follow the given
order for utilizing the ITC and the balance unutilized shall be
eligible for refund for all refund applications filed after the date
of issue of this Circular.
a) Integrated tax, to the extent of balance available;
b) Central tax and State tax/Union Territory tax, equally to the
extent of balance available and in the event of a shortfall in the
balance available in a particular electronic credit ledger (say,
Central tax), the differential amount is to be debited from the
other electronic credit ledger(i.e., State tax/Union Territory tax,
in this case).
However, for applications already filed and pending with the tax
authorities, where this order is not adhered to by the claimant,
no adverse view may be taken by the tax authorities.
Re-credit of electronic credit ledger in case of rejection of
refund claim: In case of rejection of claim for refund of unutilized
input tax credit on account of ineligibility of the said credit the
proper officer shall order for the rejected amount to be re-
credited to the electronic credit ledger of the claimant using
FORM GST RFD-01B. For recovery of this amount, a demand
notice shall have to be simultaneously issued to the claimant.
In case the demand is confirmed by an order issued, the said
amount shall be added to the electronic liability register of the
claimant through FORM GST DRC 07.
Alternatively, the claimant can voluntarily pay this amount,
along with interest and penalty, if applicable, before service of
the demand notice, and intimate the same to the proper officer
in FORM GST DRC-03.
In case of rejection of claim for refund, the rejected amount
shall be re-credited to the electronic credit ledger of the
claimant using FORM GST RFD-01B only after the receipt of an
undertaking from the claimant to the effect that he shall not file
an appeal against the said rejection or in case he files an appeal,
the same is finally decided against the claimant
For example where against a refund claim of Rs.100, only Rs.80
is sanctioned (Rs.15 is rejected on account of ineligible ITC and
Rs.5 is rejected on account of any other reason). As described
above, Rs.15 would be re-credited with simultaneous issue of
notice for recovery of ineligible ITC. Rs.5 would be re-credited
(through FORM GST RFD-01B) only after the receipt of an
undertaking from the claimant
6
NEWS
Scope of rule 96(10) of the CGST Rules: it is clarified that the
restriction for claiming refund of IGST paid on exports of goods
or services applies only to those purchasers/importers who are
directly purchasing/importing supplies on which the benefit
of reduced tax incidence or no tax incidence under specified
notifications has been availed.
Disbursal of refund amount after sanctioning by the proper
officer: In view of the refusal to disburse the sanctioned amount
by a tax authority calling into question the validity of the
sanction order on certain grounds, It is clarified that the remedy
for correction of an incorrect or erroneous sanction order lies in
filing an appeal against such order and not in withholding of the
disbursement of the sanctioned amount.
If any discrepancy is noticed by the disbursing authority, the
same should be brought to the notice of the counterpart refund
sanctioning authority, the concerned counterpart reviewing
authority and the nodal officer, but the disbursal of the refund
should not be withheld. It is hereby clarified that neither the
State nor the Central tax authorities shall refuse to disburse
the amount sanctioned by the counterpart tax authority on
any grounds whatsoever, except on account of malfeasance or
fraud committed by taxable person.
It is further clarified that any adjustment of the amount
sanctioned as refund against any outstanding demand against
the claimant can be carried out by the refund disbursing
authority if not already done by the refund sanctioning
authority.
Status of refund claim after issuance of deficiency memo:
In this regard It is clarified that show-cause-notices are not
required to be issued where deficiency memos have been
issued. A refund application which is re-submitted after the
issuance of a deficiency memo shall have to be treated as a
fresh application. No order in FORM GST RFD-04/06 can be
issued in respect of an application against which a deficiency
memo has been issued and which has not been resubmitted
subsequently.
Treatment of refund applications where the amount claimed
is less than rupees one thousand:
In this regard, it is clarified that the limit of rupees one
thousand shall be applied for each tax head separately and not
cumulatively. The limit would not apply in cases of refund of
excess balance in the electronic cash ledger.
[Circular No. 59/33/2018-GST dated 4th September, 2018]
Recovery of arrears of wrongly availed CENVAT
credit under the existing Law and inadmissible
transitional credit
The Central Government vide Circular No. 58/32/2018-GST
dated 4th September, 2018 has clarified an alternative method
of recovery of the arrears of wrongly availed CENVAT credit
under the existing Law and inadmissible transitional credit. In
this method of recovery, taxpayers may reverse the wrongly
availed CENVAT credit under the existing law and inadmissible
transitional credit through Table 4(B)(2) of FORM GSTR-3B. The
applicable interest and penalty shall apply on all such reversals
which shall be paid through entry in column 9 of Table 6.1 of
FORM GSTR-3B.
ICAI GST Newsletter l August 2018
 NEWS
4. Eligible ITC
Details Integrated Tax Central Tax State/UT Tax Cess
1 2 3 4 5
(A) ITC Available (whether in full or part)
(1) Import of goods
(2) Import of services
(3) Inward supplies liable to reverse charge (other than 1 & 2 above)
(4) Inward supplies from ISD
(5) All other ITC
(B) ITC Reversed
(1) As per rules 42 & 43 of CGST Rules
(2) Others

6.1 Payment wf Tax

Tax Paid through ITC Tax paid Tax/Cess

Description Interest Late Fee
payable Integrated Tax Central Tax State/UT Tax Cess TDS/TCS paid in cash
1 2 3 4 5 6 7 8 9 10
Integrated Tax
Central Tax
State / UT Tax
Cess

Remarks: Earlier the Circular no. 46/16/2018-GST dated 13th
April, 2018 has clarified that that the recovery of arrears arising
under the existing law shall be made as central tax liability
to be paid through the utilization of the amount available in
the electronic credit ledger or electronic cash ledger of the
registered person, and the same shall be recorded in Part II of
the Electronic Liability Register (FORM GST PMT-01).However,
the functionality to record this liability in the electronic liability
register is not available on the common portal. Therefore,
alternative method of recovery has been provided.
[Circular No. 58/32/2018-GST dated 4th September, 2018]
Scope of Principal-agent relationship in the context
of Schedule I of the CGST Act
In exercise of the powers conferred under section 168 (1) of the
CGST Act, the Board vide Circular No. 57/31/2018-GST dated
4th September, 2018 has clarified some of the issues regarding
principal-agent relationship under GST:-
1. The crucial component for covering a person within
the ambit of the term “agent” under the CGST Act is
corresponding to the representative character identified
in the definition of “agent” under the Indian Contract Act,
1872.
2. One of the important limb of “consideration” is mandatory
to consider a transaction as supply. However, para 3 of
Schedule I provides that key element of consideration is
not required to be present for treating certain activities as
supply. One such activity is supply of goods by a principal
to his agent or by an agent to his principal where agent
undertakes to supply/receive such goods on behalf of the
principal.
Looking at the convergence point between the character of the
agent under both the CGST Act and the Indian Contract Act,
1872, the following scenarios are discussed:
Not an agent
Scenario 1 Scenario 2
Mr. A appoints Mr. B to Mr. XYZ, a banking company,
procure certain goods from appoints Mr. B (auctioneer)
the market. Mr. B identifies to auction certain goods. The
various suppliers who can auctioneer arranges for the
provide the goods as desired auction and identifies the
by Mr. A, and asks the supplier potential bidders. The highest
(Mr. C) to send the goods and bid is accepted and the goods
issue the invoice directly are sold to the highest bidder
to Mr. A. In this scenario, by M/s XYZ. The invoice for
Mr. B is only acting as the the supply of the goods is
procurement agent, and has issued by M/s XYZ to the
in no way involved himself in successful bidder. In this
the supply or receipt of the scenario, the auctioneer
goods. Hence, in accordance is merely providing the
with the provisions of this auctioneering services with
Act, Mr.B is not an agent of no role played in the supply
Mr. A for supply of goods in of the goods. Even in this
terms of Schedule I. scenario, Mr. B is not an agent
of M/s XYZ for the supply of
goods in terms of Schedule I.

7
ICAI GST Newsletter l August 2018
 NEWS

An agent terms of the clause (vii) of section 24 of the CGST Act. In respect
Scenario 3 Scenario 4 of commission agents in Scenario 4, notification No. 12/2017
Central Tax (Rate) dated 24.06.2017 has exempted “services
Mr. A, an artist, appoints M/s Mr. A sells agricultural
B (auctioneer) to auction his produce by utilizing the by any APMC or board or services provided by the commission
painting. M/s B arranges for services of Mr B who is a agents for sale or purchase of agricultural produce” from GST.
the auction and identifies commission agent as per Thus, the “services” provided by the commission agent for
the potential bidders. The the Agricultural Produce sale or purchase of agricultural produce is exempted. Such
highest bid is accepted and Marketing Committee Act commission agents (even when they qualify as agent under
the painting is sold to the (APMC Act) of the State. Mr Schedule I) are not liable to be registered according to sub-
highest bidder. The invoice B identifies the buyers and clause (a) of sub-section (1) of section 23 of the CGST Act, if
for the supply of the painting sells the agricultural produce the supply of the agricultural produce, and /or other goods or
is issued by M/s B on the on behalf of Mr. A for which services supplied by them are not liable to tax or wholly exempt
behalf of Mr. A but in his he charges a commission under GST. However, in cases where the supply of agricultural
own name and the painting from Mr. A. As per the APMC produce is not exempted and liable to tax, such commission
is delivered to the successful Act, the commission agent is
agent shall be liable for compulsory registration under sub-
bidder. In this scenario, M/s a person who buys or sells
B is not merely providing the agricultural produce on section (vii) of section 24 of the CGST Act
auctioneering services, but behalf of his principal, or [Circular No. 57/31/2018-GST dated 4th September, 2018]
is also supplying the painting facilitates buying and selling Remarks: Making reference to section 182 of Indian Contract
on behalf of Mr. A to the of agricultural produce Act, 1872 is welcome to understand the scope and limits of
bidder, and has the authority on behalf of his principal agency or intermediary.
to transfer the title of the and receives, by way of
painting on behalf of Mr. remuneration, a commission Waiver of late fees by the following taxpayers
A. This scenario is covered or percentage upon the The Central Government vide Notification no. 41/2018 dated
under Schedule I. amount involved in such 4th September, 2018 has waived the late fee paid due to failure
A similar situation can exist transaction.
to furnish the Returns required under section 39 or 45 by the
in case of supply of goods In cases where the invoice is due date by the following class of taxpayers:
as well where the C&F agent issued by Mr. B to the buyer,
or commission agent takes the former is an agent covered 1. The registered persons whose return in FORM GSTR-3B
possession of the goods from under Schedule I. However, of the CGST Rules, 2017 for the month of October, 2017,
the principal and issues the in cases where the invoice is was submitted but not filed on the common portal, after
invoice in his own name. issued directly by Mr. A to the generation of the application reference number
In such cases, the C&F/ buyer, the commission agent 2. The registered persons who have filed the return in FORM
commission agent is an agent (Mr. B) doesn’t fall under the GSTR-4 of the CGST Rules, 2017 for the period October
of the principal for the supply category of agent covered
to December, 2017 by the due date but late fee was
of goods in terms of Schedule under Schedule I.
I. The disclosure or non- erroneously levied on the common portal
disclosure of the name of the 3. The Input Service Distributors who have paid the late fee
principal is immaterial in such for filing or submission of the return in FORM GSTR-6 of the
situations. CGST Rules, 2017 for any tax period between the 1st day of
In scenario 1 and scenario 2, Mr. B shall not be liable to obtain January, 2018 and the 23rd day of January, 2018.
registration in terms of clause (vii) of section 24 of the CGST Act. [Notification no. 41/2018 dated 4th September, 2018]
He, however, would be liable for registration if his aggregate Extension of time limit for making declaration in
turnover of supply of taxable services exceeds the threshold
specified in sub-section (1) of section 22 of the CGST Act. In
Form GST ITC-04
scenario 3, M/s B shall be liable for compulsory registration in The Central Government vide Notification No. 40 /2018 –CT
dated 4th September, 2018; Notification No. 42 /2018 –CT
dated 4th September, 2018 has extended the time limit of filing
various declarations upto the date as shown in the table below:
S. Form Purpose Due date
no
1. GST Form for declaration 30th September,
ITC- in respect of goods 2018
04 dispatched to a job worker
or received from a job
worker or sent from one
job worker to another,
during the period from
July, 2017 to June, 2018

8
ICAI GST Newsletter l August 2018

2. GST Form containing details 3rd October, 2018
ITC- of the stock of inputs and (Only for registered
01 inputs contained in semi- persons who have
finished or finished goods filed the application
held in stock by him on the in Form GST-
date on which the option CMP-04 between
of availing composition the period from
is withdrawn or denied 2nd March, 2018 to
to the effect that he is 31st March, 2018)
eligible to avail the input
tax credit
[Notification No. 40 /2018 –CT dated 4th September, 2018;
Notification No. 42 /2018 –CT dated 4th September, 2018]
Central Goods and Services tax (Eighth Amendment)
Rules, 2018
The Central Government vide Notification No. 39 /2018 –CT
dated 4th September, 2018 has notified following rules further
to amend the Central Goods and Service Tax Rules, 2017.
Insertion in Rule : 22 Cancellation of registration
New proviso in sub- rule (4) of Rule 22 has been inserted to
provide thatwhere the person instead of replying to the notice
served for cancellation of registration for contravention of the
provisions contained in clause (b) or clause (c) of sub-section (2)
of section 29, furnishes all the pending returns and makes full
payment of the tax dues along with applicable interest and late
fee, the proper officer shall drop the proceedings and pass an
order in FORM GST-REG 20
Remarks: With the insertion of this proviso proper officer shall
drop the proceedings initiated on person paying tax under
section 10 who has not furnished returns for 3 consecutive tax
periods or any other registered person who has not furnished
return for a continuous period of 6 months and pass an order in
FORM GST-REG 20 to such person on furnishing all the pending
returns and making full payment of the tax dues along with
applicable interest and late fee by him.
Insertion in Rule : 36 Documentary requirements and
conditions for claiming input tax credit
New proviso in sub- rule (2) of Rule 36 has been inserted to
provide that if the invoice does not contain all the specified
particulars but contains the details of the amount of tax
charged, description of goods or services, total value of supply
of goods or services or both, GSTIN of the supplier and recipient
and place of supply in case of inter-State supply, input tax credit
may be availed by such registered person.
Remarks: With the insertion of this proviso a relief has been
given to registered person by allowing ITC on the basis of invoice
if that invoice contains not all the necessary but following
particulars:
• value of goods and tax thereon ,
• description of goods or services
• GSTIN of the supplier and recipient and
• Place of supply in case of inter-State supply.
Insertion in Rule 138 A: Information to be furnished prior to
ICAI GST Newsletter l August 2018
NEWS
commencement of movement of goods and generation of
e-way bill.
New proviso in sub- rule (1) of Rule 138A has been inserted to
provide that in case of imported goods, the person in charge of
a conveyance shall also carry a copy of the bill of entry filed by
the importer of such goods and shall indicate the number and
date of the bill of entry in Part A of FORM GST EWB-01.
Remarks:It would seem that ‘any’ kind of bill of entry (into-
bond, ex-bond, home consumption, rewarehousing and SEZ-
cargo) may be carried by the transporter.
Substitution in sub-rule 10 of Rule 96
The persons claiming refund of integrated tax paid on exports
of goods or services should not have –
(a) received supplies on which the following benefits of the
Government of India has been received:
• Notification No. 48/2017-Central Tax, dated the 18th
October, 2017: It covers domestic supplies made
against advance authorization, supply of capital goods
against EPCG authorization, supply of goods to EOU
& supply of gold by a bank or PSU against advance
authorization.
• Notification No. 40/2017-Central Tax (Rate), dated the
23rd October or notification No. 41/2017-Integrated Tax
(Rate), dated the 23rd October, 2017: This notification
covers supplies made to merchant exporter at the rate
of 0.1% in case of IGST or 0.05% each in case of CGST &
SGST.
Hence in above cases, exporter has to export only under
LUT and claim refund of accumulated ITC.
(b) availed the benefit under following notifications:
• Notification No. 78/2017-Customs, dated the 13th
October, 2017: This notification provides exemption
from Customs Duty & IGST under Customs on goods
imported or procured from Public or Private Warehouse
or from International Exhibition by Hundred per cent
EOU, STP or EHTP units.
• Notification No. 79/2017- Customs, dated the
13th October, 2017: This notification provides
exemption from Customs Duty & IGST under Customs
on imports under EPCG, Advance Authorization,
Advance Authorization for Annual Requirements,
Advance Authorization for Deemed Export, Advance
Authorization for export of Prohibited Goods and
Narrow Woven Fabrics, etc.
Remarks: The latest amendment now carves out such cases
referred above by way of a separate clause and provides that if
the benefit has been availed by an exporter, he cannot export
with payment of IGST. Exporter must compulsorily export under
LUT and claim refund of the accumulated ITC. Said amendment
is applied retrospectively w.e.f. 23rd October, 2017. This would
adversely affect claim of transition credit and credit on capital
goods to EOUs.
Insertion of Forms after Form GSR 8
9
 NEWS
1. Form GSTR 9 Annual Return [Notification No. 39 /2018 –CT dated 4th September, 2018]
2. Form GSTR 9 A Annual Return (For Composition Taxpayer)
Clarification regarding removal of restriction of
Existing provision Revised provision refund of accumulated ITC on fabrics
Substitution in Rule: 55 Transportation of goods without issue
The Central Government vide circular no. 56/30/2018 dated
of invoice.
24th August, 2018has clarified certain doubts raised, with
(5) Where the goods are being Where the goods are
reference to changes made vide Notification no. 20/2018-CT
transported in a semi knocked being transported in a
down or completely semi knocked down or (R) dated 20/2018 which has removed the restriction of not
knocked down condition - completely allowing refund of ITC accumulated on account of inverted duty
(a) the supplier shall issue the knocked down condition structure on fabrics w.e.f 1st August, 2018 and to lapse the
complete invoice before dispatch or in batches or lots - accumulated ITC lying unutilized as on 31st July,2018
of the first Doubts raised and their respective clarifications are explained
consignment; Remarks: With insertion below:
(b) the supplier shall issue a of these words “or in
delivery challan for each of the batches or lots” the Doubt Clarification
subsequent consignments, giving manner prescribed for Whether this Notification 20/2018 CT(R) provides
reference of the invoice; transportation of goods in notification seeks for lapsing of input tax credit that
(c) each consignment shall be a semi knocked down or to lapse all the would have been refundable in terms
accompanied by copies of the completely knocked down input tax credit of section 54 of the Act, for the period
corresponding delivery challan condition shall also apply lying unutilized prior to the 31st July, 2018, but for the
along with a duly certified copy to the transportation of after payment restriction imposed vide notification No.
of the invoice; and goods in batches or lots.
of tax upto the 5/2017-Central Tax (Rate) and that too
(d) the original copy of the
month of July. to the extent of accumulated ITC lying
invoice shall be sent along with
2018 unutilized after making payment of GST
the last consignment.
upto the month of July, 2018 shall lapse.
Substitution in Sub-rule (4) of Rule 89
“Adjusted Total turnover” means “Adjusted Total Turnover” Whether Proviso (ii) to section 54 (3) provides
the turnover in a State or a Union means the sum total of the unutilized ITC in that in respect of notified goods, the
territory, as defined under clause value of- respect of services refund of such accumulated input tax
(112) of section 2, excluding – (a) the turnover in a State and capital goods credit shall not be allowed. Notification
(a) the value of exempt supplies or a Union territory, as shall also be No. 5/2017-Central Tax (Rate) has
other than zero-rated supplies defined under clause (112) disallowed been issued in terms of this provision.
and of section 2, excluding the Therefore it is clarified that the
(b) the turnover of supplies turnover of services; and restriction of refund of accumulated ITC
in respect of which refund is (b) the turnover of zero- under notification No. 5/2017-Central
claimed under sub rules rated supply of services Tax (rate) dated 28.06.2017 is applicable
(4A) or (4B) or both, if any, determined in terms of
only in respect of refund of accumulated
during the relevant period; clause (D) and non-zero-
ITC on inputs. This notification does not
rated supply of services,
put any restriction in relation to the ITC
excluding-
(i ) the value of exempt on input services and capital goods.
supplies other than zero- Implication to It is clarified that the said condition
rated supplies; and fabrics like cotton of lapsing of ITC would apply only if
(ii) The turnover of supplies and silk where input tax credit on inputs has been
in respect of which refund there was no accumulated on account of inverted duty
is claimed under sub-rule inverted duty structure therefore; this notification has
(4A) or sub-rule (4B) or structure no implication to fabrics like cotton and
both, if any, during the silk where there was no inverted duty
relevant period.
structure.
Remarks:Much needed
clarity now comes Whether It is clarified that the proviso has
with this amendment accumulated no applicability to the input tax
about the cash-accrual ITC in respect of credit relating to zero rated supplies.
basis in numerator and exports shall also Accordingly, accumulated ITC on zero
denominator. be made to lapse rated supplies shall not lapse.

10
ICAI GST Newsletter l August 2018
 NEWS

Manner of It is clarified that for determination of Sl. Form For the Last date for
calculating the such amount, the formula as prescribed No (2) Month/ filing of return
ITC amount in rule 89 (5) of the CGST rules shall (1) Quarter in FORM GSTR1
accumulated mutatis mutandis apply as it applies for (3) (4)
on account of determination of refundable amount for 1. GSTR 1 by the For each of the 11th day of
inverted duty inverted duty structure. Such amount taxpayers with months from the month
structure shall be determined for the months annual aggregate July, 2018 to succeeding such
from July, 2017 to July 2018 turnover of more March, 2019 month.
than Rs. 1.5 crore
The procedure to be followed for lapsing of accumulated input
2. GSTR 1 by the July - 31st October,
tax credit: A taxable person, whose input tax credit is liable
taxpayers with September, 2018
to be lapsed in terms of said notification, shall calculate the annual aggregate 2018
amount of such accumulated ITC which is liable to be lapsed, turnover upto 1.5 October- 31st January,
shall, upon self-assessment, be furnished by such person in his crore December, 2019
GSTR 3B return for the month of August, 2018. The amount shall 2018
be furnished in column 4B (2) of the return [ITC amount to be January - 30th April, 2019
reversed for any reason (others)]. Verification of accumulated March, 2019
ITC amount so lapsed may be done at the time of filing of first
refund (on account of inverted duty structure on fabrics) by [Notification No. 32/2018 – Central Tax; Notification No.
such person. Therefore, a detailed calculation sheet in respect 33/2018 – Central Tax dated 10th August, 2018]
of accumulated ITC lapsed shall be prepared by the taxable The present system of filing of GSTR 3B is extended
person and furnished at the time of filing of first refund claim upto March, 2019
on account of inverted duty structure. The Central Government vide Notification No. 34 /2018 –
[Circular no. 56/30/2018 dated 24th August, 2018] Central Tax dated 10th August, 2018 has notified that the
Due date filing of GSTR 3B/GSTR 1 for the month present system of filing of GSTR 3B will continue till March,
of July and August, 2018 extended for registered 2019.
persons in Kerala, Kodagu (Karnataka); Mahe Therefore, the return in FORM GSTR-3B for each of the months
(Pondicherry) from July, 2018 to March, 2019 shall be furnished electronically
The Central Government vide Notification No. 36 /2018 – through the common portal, on or before the 20th of the month
Central Tax dated 24th August, 2018 and Notification No. 37 succeeding such month.
/2018 – Central Tax dated 24th August has notified that the Comment: Hence, the Simplified Returns available in public
return in FORM GSTR-3B/ GSTR 1 for the month of July, 2018 domain is unlikely to be introduced during the current financial
and August,2018 for the registered persons in Kerala, Kodagu year. Verification of compliance with conditions of section 16(2)
( Karnataka); Mahe ( Pondicherry) is required to furnish continues to be offline for all taxable persons.
electronically through the common portal, on or before the 6th [Notification No. 34 /2018 – Central Tax dated 10th August,
October, 2018 & 10th October, 2018 respectively. 2018]
However, Notification No. 38 /2018 – Central Tax dated 24th Classification of fertilizers supplied for use in the
August, 2018 has notified that the persons who are required to manufacture of other fertilizers at 5% GST rate
file quarterly Return in the form GSTR 1 for the quarter from July, Fertilizers falling under heading 3102, 3103, 3104 and 3105,
2018 to September, 2018 shall furnish the return electronically other than those which are clearly not to be used as fertilizers,
through the common portal on or before 15th October, 2018 attract 5% GST. However, fertilizers which are clearly not to
[Notification No. 36 /2018 – Central Tax dated 24th August, be used as fertilizer attract 18% GST. The phrase “other than
2018; Notification No. 37 /2018 – Central Tax dated 24th clearly to be used as fertilizers” would not cover such fertilizers
August, 2018; Notification No. 38 /2018 – Central Tax dated that are used for making complex fertilizers for use as soil or
24th August, 2018] crop fertilizers.
Return Filing Therefore, The Central Government vide Circular No.
The Central Government vide Notification No. 32/2018 – 54/28/2018-GST dated, 9th August, 2018 has clarified that the
Central Tax; Notification No. 33/2018 – Central Tax dated 10th fertilizers supplied for direct use as fertilizers, or supplied for use
August,2018 has provided the time limits within which the in the manufacturing of other complex fertilizers for agricultural
taxpayers shall furnish the Forms as specified in Column (2) of use (soil or crop fertilizers), will attract 5% IGST.
the table below: [Circular No. 54/28/2018-GST dated, 9th August, 2018]

11
ICAI GST Newsletter l August 2018

Provisionally migrated persons may now apply for
GSTIN
Central Government vide Notification No.31/2018-Central Tax
dated 6th August, 2018 has provided that the persons who did
not file the complete FORM GST REG26 of the Central Goods
and Services Tax Rules, 2017 but received only a Provisional
Identification Number (PID) till the 31st December, 2017 may
now apply for Goods and Services Tax Identification Number
(GSTIN).
The special procedure to be followed for registration of such
taxpayers is as detailed below:-
1. The details specified below should be furnished by such
taxpayers to the jurisdictional nodal officer on or before the
31st August, 2018.
a) Provisional ID
b) Registration Number under the earlier law (Taxpayer
Identification Number (TIN)/Central Excise/Service Tax
Registration number)
c) Date on which token was shared for the first time
d) Whether activated part A of the aforesaid FORM GST
REG-26
e) Contact details of the taxpayer
f) Email id
g) Mobile
h) Reason for not migrating in the system
i) Jurisdiction of Officer who is sending the request
2. On receipt of an e-mail from the Goods and Services
Tax Network (GSTN), such taxpayers should apply for
registration by logging onto https://www.gst.gov.in/ ) in the
“Services” tab and filling up the application in FORM GST
REG-01 of the Central Goods and Services Tax Rules, 2017.
3. After due approval of the application by the proper officer,
such taxpayers will receive an email from GSTN mentioning
the Application Reference Number (ARN), a new GSTIN and
a new access token.
4. Upon receipt, such taxpayers are required to furnish the
following details to GSTN by email, on or before the 30th
September, 2018, to migration@gstn.org.in:–
(a) New GSTIN;
(b) Access Token for new GSTIN;
(c) ARN of new application;
(d) Old GSTIN (PID).
5. Upon receipt of the above information from such taxpayers,
GSTN shall complete the process of mapping the new GSTIN
to the old GSTIN and inform such taxpayers.
6. Such taxpayers are required to log onto the common portal
www.gstn.gov.in using the old GSTIN as “First Time Login”
for generation of the Registration Certificate.`
Such taxpayers shall be deemed to have been registered
with effect from the 1st July, 2017.
Comment: Please take note that this deeming fiction allows
12
NEWS
claim of eligible credits from that date. Identification of such
credits and adjustment with outstanding liabilities may be
allowed ‘one-time’ opportunity only.
[Notification No.31/2018-Central Tax dated 6th August, 2018]
Exemption from tax on procurements made from
unregistered person U/s 9(4) of CGST Act, 2018 till
September 30, 2019
The Central Government vide Notification No. 22/2018 – Central
Tax (Rate) dated 6th August, 2018 has amended Notification
No. 12/2018– Central Tax (Rate) dated 29th June, 2018 to
further extend the exemption from tax under reverse charge
mechanism u/s 9(4) of CGST Act, 2017 on procuring taxable
goods/services from unregistered suppliers till September 30,
2019. Earlier this exemption was upto 30th September, 2018
only.
Comment: With the introduction of CGST Amendment Bill,
2018 and the changes in section 9(4), this long-term extension
of the exemption appears to require some reconciliation when
the ‘classes’ actually get notified under the amended law.
[Notification No. 22/2018 – Central Tax (Rate) dated 6th August,
2018]
CuSTomS
Standard operating procedures for discharge of bonds executed
by nominated agencies/ banks.
The Central Government vide Circular No. 25/2018 dated 8th
August, 2018 has provided standard operating procedure to
be followed for the expeditious discharge of bonds for the
purpose of export of gold jewelry. In order to reduce such bond
pendencies certain time periods have been defined in table
below:
Particulars Time period
Acknowledgement by Acknowledgement by
Assistant/Deputy Assistant/Deputy
Commissioner Commissioner
Nominated agencies would Within 7 days of the receipt of
electronically provide the deficiency memo
the deficient/ additional
documents
Discharge of bond by Within 7 days of the
Assistant and Deputy confirmation of Export
Commissioner
[Circular No. 25/2018 dated 8th August, 2018]
ICAI GST Newsletter l August 2018

The Taxable evenT in GST –
“Supply”
Taxable event is that event, happening of which attracts liability
to tax. Taxable event is a very important event in any law as
the levy and collection of tax is based on the happening of the
taxable event. Although, the taxable event happens to be at a
particular point of time, the levy and collection of such tax may
be postponed for administrative convenience, to a later date.
The Article 366 (12A) of the Constitutional (101st Amendment)
Act, 2016 defines “Goods and Services Tax” as any tax on supply
of goods, or services or both, except for taxes on the supply of
the alcoholic liquor for human consumption.
The taxable event in GST is supply of goods or services or
both.Therefore, supply will hold the greatest significance and
shall be an important event in determining the taxability of all
transaction whether commercial or otherwise under the GST
regime.
The term, “supply” has been inclusively defined in the Act.
Supply includes all forms of supply of goods or services or both
such as sale, transfer, barter, exchange, licence, rental, lease or
disposal made or agreed to be made for a consideration by a
person in the course or furtherance of business. Supply also
includes:import of services for a consideration whether or not
in course of furtherance of business, the activities specified in
schedule I (without consideration) and the activities as referred
in schedule II. Though these terms are not defined in the Act,
dictionary meaning of the same are elaborated below:
Sale Transferring the property in goods from one to
another, upon valuable consideration.
Transfer Any transfer of goods or right in goods or of
undivided share in goods without transfer of title
thereof.
Barter To exchange one commodity for another without
use of money.
Exchange To swap, to part with, give or transfer for an
equivalent with the use of money.
Licence Permission granted by competent authority
to exercise certain privileges without such
authorization the activity would have constituted
as an illegal act.
Rental Periodical payment for the use of another
property.
Lease Contractual agreement by which one party
conveys an estate in property to another party,
for a limited period, subject to various conditions,
in exchange for something of value, but still
remain ownership.
Disposal To pass or into the control of someone else; to
alienate, bestow, or part with.
The meaning and scope of supply under GST can be understood
in terms of following five parameters, which can be adopted to
characterize a transaction as supply:
ICAI GST Newsletter l August 2018
ARTICLES
1. Supply of goods or services. Supply of anything other than
goods or services does not attract GST
2. Supply should be made for a consideration
3. Supply should be made in the course or furtherance of
business
4. Supply should be made by a taxable person
5. Supply should be a taxable supply.
While these five parameters describe the concept of supply,
there are a few exceptions to the requirement of supply being
made for a consideration, in the course or furtherance of
business and made by a taxable person.
1. Supply of Goods or Services or Both
Section 2(52) of CGST Act 2017 defines “goods” means every
kind of movable property other than money and securities
but includes actionable claim, growing crops, grass and things
attached to or forming part of the land which are agreed to be
severed before supply or under a contract of supply.
Section 2(102) of CGST Act 2017 defines “services” means
anything other than goods, money and securities but includes
activities relating to the use of money or its conversion by
cash or by any other mode, from one form, currency or
denomination, to another form, currency or denomination for
which a separate consideration is charged.
Schedule II (read with section 7) to the CGST Act, 2017 lists
a few activities which are to be treated as supply of goods or
supply of services. For instance, any transfer of title in goods
would be a supply of goods, whereas any transfer of right in
goods without transfer of title would be considered as services.
The Government may notify the transactions that are to be
treated as -
• Supply of goods and not as a supply of services; or
• Supply of services and not as a supply of goods.
Further Schedule III (read with section 7) to the CGST Act, 2017
specifies activities which shall be treated as neither supply of
goods nor supply of services or outside the scope of GST. This
includes:
 Services by an employee to the employer in the course of
or in relation to his employment.
 Services by any court or tribunal (time being in force).
 Services by MPs, MLAs, Panchayats, Municipalities and
member of other local authorities.
13

 The duties performed by any person who had any post
in pursuance of the provisions of the constitution in that
capacity.
 Services of funeral, burial, crematorium or mortuary
including transportation of the deceased.
 Sale of land(subject to clause (b) of paragraph 5 of schedule
II) and sale of building where the entire consideration has
been received after completion certificate is issued or after
its first occupation.
 Actionable claims are included in the definition of goods,
however, Schedule III provides that actionable claims other
than lottery, betting and gambling shall be neither goods
nor services.
 The activities or transactions undertaken by the Central
Government, a State Government or any local authority in
which they are engaged as public authorities, as may be
notified by the Government on the recommendations of
the Council, shall be treated neither as a supply of goods nor
a supply of services. Accordingly, it has been notified that
the Central Government or State Government or any local
authority in which they are engaged as public authority, by
way of any activity in relation to a function entrusted to a
Panchayat under article 243G of the Constitution is neither
a supply of goods nor a supply of service.
2. Supply for Consideration
Section 2(31) of CGST Act 2017 defines “consideration” in
relation to the supply of goods or services or both includes––
(a) any payment made or to be made, whether in money
or otherwise, in respect of, in response to, or for the
inducement of, the supply of goods or services or both,
whether by the recipient or by any other person but shall
not include any subsidy given by the Central Government
or a State Government;
(b) the monetary value of any act or forbearance, in respect
of, in response to, or for the inducement of, the supply of
goods or services or both, whether by the recipient or by
any other person but shall not include any subsidy given by
the Central Government or a State Government:
Provided that a deposit given in respect of the supply of goods
or services or both shall not be considered as payment made
for such supply unless the supplier applies such deposit as
consideration for the said supply.
However, there are exceptions to the requirement of
‘Consideration’ as a pre-condition for a supply to be called a
supply as per GST. As per schedule I to CGST Act, 2017, activities
as mentioned below shall be treated as supply even if made
without consideration:
 Permanent transfer or disposal of business assets where
input tax credit has been availed on such assets.
 Supply of goods or services or both between related
persons or between distinct persons as specified in section
25, when made in the course or furtherance of business:
Provided that gifts not exceeding fifty thousand rupees in
value in a financial year by an employer to an employee
shall not be treated as supply of goods or services or both.
 Supply of goods—
(a) by a principal to his agent where the agent undertakes
to supply such goods on behalf of the principal; or
14
ARTICLES
(b) by an agent to his principal where the agent undertakes
to receive such goods on behalf of the principal.
 Import of services by a taxable person from a related person
or from any of his other establishments outside India, in
the course or furtherance of business.
3. Supply in the Course or Furtherance of Business
GST is essentially a tax only on commercial transactions. Hence,
only those supplies that are in the course or furtherance of
business qualify as supply under GST. Hence, any supplies made
by an individual in his personal capacity do not come under the
ambit of GST unless they fall within the definition of business as
defined in the Act.
Section 2(17) of CGST Act 2017 defines “business” includes––
(a) any trade, commerce, manufacture, profession, vocation,
adventure, wager or any other similar activity, whether or
not it is for a pecuniary benefit;
(b) any activity or transaction in connection with or incidental
or ancillary to sub-clause (a);
(c) any activity or transaction in the nature of sub-clause (a),
whether or not there is volume, frequency, continuity or
regularity of such transaction;
(d) supply or acquisition of goods including capital goods and
services in connection with commencement or closure of
business;
(e) provision by a club, association, society, or any such body
(for a subscription or any other consideration) of the
facilities or benefits to its members;
(f) admission, for a consideration, of persons to any premises;
(g) services supplied by a person as the holder of an office which
has been accepted by him in the course or furtherance of
his trade, profession or vocation;
(h) services provided by a race club by way of totalisator or a
licence to book maker in such club; and
(i) any activity or transaction undertaken by the Central
Government, a State Government or any local authority in
which they are engaged as public authorities.
No definition or test has been specified to find out whether the
activity is in the course or furtherance of business. However,
the following business test is normally applied to arrive at a
guiding factor about whether it is in the course or furtherance
of business or not:
i. Whether the activity is seriously and earnestly pursued?
ii. Whether the activity is pursued with reasonable or
recognizable continuity?
iii. Whether the activity is conducted in a regular manner
based on sound and recognized business principles?
iv. Whether the activity is predominantly concerned with the
making of taxable supply for consideration/ profit motive?
However, there is one exception to this ‘Course or Furtherance
of Business’ rule i.e., import of services for a consideration.
Thus, Supply includes import of services for a consideration
whether or not in the course or furtherance of business. This
implies that import of services even for personal consumption
would be considered as supply and consequently, would be
liable to tax. Imports of service shall be taxable on reverse
charge basis, i.e, in the hands of the recipient of service. The
threshold limit clause shall not apply here.
ICAI GST Newsletter l August 2018

4. Supply by a Taxable Person
Section 2(107) of CGST Act 2017 defines “taxable person”
means a person who is registered or liable to be registered
under section 22 or section 24.
A supply to attract GST should be made by a taxable person.
Hence, a supply between two non-taxable persons does not
constitute supply under GST. Even an unregistered person who
is liable to be registered is a taxable person. Similarly, a person
not liable to be registered but has taken voluntary registration
and got himself registered is also a taxable person. However,
there is exception to this rule, supply from a non-taxable person
to a registered person in case of RCM will attract GST.
Notification no.5/2017- Central Tax dated 19-06-2017, exempts
a person who is engaged in making only supplies of taxable
goods or services or both on which reverse charge applies,
from obtaining registration under GST. Hence, to conclude, a
non-taxable person can also make a taxable supply in above
scenario (subject to section 9(3) of CGST Act).
It should be noted that GST in India is State-centric. Hence,
a person making supplies from different States needs to take
separate registration in each State. A person who has obtained
or is required to obtain more than one registration, whether in
one State or Union territory or more than one State or Union
territory shall, in respect of each such registration, be treated
as distinct persons for the purposes of GST. Hence, a supply
between these entities constitutes supply under GST.
5. Taxable Supply
Section 2(108) of CGST Act 2017 defines “taxable supply”
means a supply of goods or services or both which is leviable
to tax under this Act
For a supply to attract GST, the supply must be taxable supply.
Taxable Supply can be either Inter State Supply or Intra State
Supply.
• Inter State Supply
Inter- State supply of goods means a supply of goods where
the location of the supplier and place of supply are in different
States or Union territories, then IGST has to paid. Imports,
Supplies from and to SEZs are treated as deemed Inter-State
supplies.
• Intra State Supply
Intra State supply of goods means supply of goods where the
location of the supplier and the place of supply are in the same
State or Union territory, then CGST and SGST/UTGST has be
paid.
Various types of supplies which are not liable to tax are :
• Exempt supply
Section 2(47) of CGST Act 2017 defines“exempt supply” means
supply of any goods or services or both which attracts nil rate of
tax or which may be wholly exempt from tax under section 11,
or under section 6 of the Integrated Goods and Services Tax Act,
and includes non-taxable supply.
Thus, it can be construed that an Exempted supply includes
three types of supply:
 Supply attracting Nil Tax rate
 Wholly Exempt under Section 11 of the CGST Act or section
6 of the IGST act.
 Non-taxable Supply
ICAI GST Newsletter l August 2018
ARTICLES
Example: To list a few – Milk, Fruits, Vegetables, PureServices
provided to Government, Services by way of health care
services etc.
• Non-taxable supply
Section 2(78) of CGST Act 2017 defines“non-taxable supply”
means a supply of goods or services or both which is not
leviable to tax under this Act or under the Integrated Goods
and Services Tax Act.
Example : Alcoholic liquor for human consumption, Petroleum
products etc.
• Nil rated supplies
Such Supply of goods or services which attracts nil rate of tax.
It is Pertinent to note that, there is not a single good specified
in the tariff schedule of GST at Nil rated. However, there is one
entry in List of Services.
As per notification no.11/2017 – Central Tax (Rate) dated 28-
06-2017, there is only one entry(heading 9972 is also nil entry)
notified nil rated (heading 9986).
Example : Services notified nil rated are:
(i) Support services to agriculture, forestry, fishing, animal
husbandry.
(ii) Services by way of pre-conditioning, pre-cooling, ripening,
waxing, retail packing, labelling of fruits and vegetables
which do not change or alter the essential characteristics
of the said fruits or vegetables.
(iii) Carrying out an intermediate production process as job
work in relation to cultivation of plants and rearing of all
life forms of animals, except the rearing of horses, for
food, fibre, fuel, raw material or other similar products or
agricultural produce.
• Zero-rated supplies
“zero-rated supply” shall have the meaning assigned to it in
section 16 of IGST Act. As per Section 16. (1) “zero rated supply”
means any of the following supplies of goods or services or
both, namely:––
(a) export of goods or services or both; or
(b) supply of goods or services or both to a Special
Economic Zone developer or a Special Economic Zone
unit.
The main point to note is that Input Tax credit is available in
case of zero –rated Supply even if the supplies are exempt. It
means that if exempt supply made in India, Input Tax Credit
not available but same exempt supply exported then Input tax
credit available.
Example: Consultancy Services by Indian Consulting firm
to overseas entity, payment for which is received in foreign
currency,Sale of goods from a supplier in India to a person in
Germany etc.
15

offenCeS and penalTy
proviSionS under GST
One full year has been passed after implementation of GST.
But for effective compliance and implementation of any law,
it is necessary to provide for consequences of non-compliance
of that Act. Provisions related to penalties and prosecutions
under GST Act are covered for deterrence so that deliberate tax
evasion can be avoided and due tax revenue can be obtained to
compensate the Government from loss due to non-compliance.
To be proactive in preventing fraudulent activities and to avoid
serious pecuniary liability for non-observance of law, it is
necessary to understand such provisions.
Offences under GST Act:
Provisions related to offences and penalties are covered in
Chapter XIX (section 122 to section 138) under CGST Act.
Section 132 of the CGST Act provides for certain offences. These
offences are liable for penalty and some offences are liable for
prosecution.
List of offences specified under CGST Act are as under:
Offences
Nature of offence
related to
Registration • Failure to register despite being liable to
pay tax.
• Furnishing false information regarding
registration particulars either at the time of
applying for registration or subsequently.
Invoice • Making a supply without invoice or with
false/ incorrect invoice.
• Issuing an invoice without making supply.
• Issuing invoice or document using GSTIN of
another person.
Tax payment • Not paying tax collected for a period
exceeding three months;
• Not paying tax collected in contravention of
the CGST/SGST Act for a period exceeding
3 months;
• Non-deduction or lower deduction of tax
deducted at source or not depositing tax
deducted at source under section 51;
• Non-collection or lower collection of or non
-payment of tax collectible at source under
section 52.
• Suppressing turnover leading to tax evasion.
Input Tax • Availing/utilizing input tax credit without
Credit actual receipt of goods and/or services;
• Availing/distributing of input tax credit in
contravention of provisions of the Act.
16
ARTICLES
Refund • Fraudulently obtaining any refund.
Accounts and • Furnishing false information or falsification
documents of financial records or furnishing of fake
accounts/ documents with intent to evade
payment of tax.
• Failure to maintain accounts/documents in
the manner specified in the Act or failure to
retain accounts/documents for the period
specified in the Act.
• Failure to furnish information/documents
required by an officer in terms of the Act/
Rules or furnishing false information/
documents during the course of any
proceeding.
• Transporting goods without prescribed
documents.
Other • Obstructing or preventing any official in
matters discharge of his duty;
• Supplying/transporting/storing any goods
liable to confiscation.
• Tampering/destroying any material
evidence.
• Disposing of /tampering with goods
detained/ seized/attached under the Act.
Cognizable and non-bailable offences:
Offences under GST are further classified into cognizable and
non-bailable offences as well as non-cognizable and bailable
offences. General meaning of these terms are as under:
• Cognizable offences: A case in which specially empowered
officer has the authority to arrest without warrant
• Non-cognizable offences: A case in which specially
empowered officer has no authority to arrest without
warrant.
• Bailable offences: Offences for which bail can be granted.
• Non-bailable Offences: Offences for which accused does
not have right to be released on bail, but the bail can be
granted at the discretion of court.
Following offences are cognizable and non-bailable offences
under GST, if amount of tax evaded, amount of input tax credit
availed or amount of refund taken is more than Rs.5 Crore:
(1) Supply of goods or services or both without issuance of bill;
(2) Issuance of bill or invoice without supply of goods or
services.
(3) Avail wrong input tax credit on bills without supply;
(4) Tax collected but not deposited to the Government.
ICAI GST Newsletter l August 2018
 ARTICLES
All other offences are non-cognizable and bailable. General disciplines related to penalty:
Moreover, as per section 69 of the CGST Act, where the Section 126 of the CGST Act specifies for general disciplines to
Commissioner has reason to believe that a person has be followed while imposing penalty. Such disciples are as under:
committed offence specified in clause (a) to (d) of section (1) No penalty to be imposed without issuance of Show Cause
132(1) which is punishable under clause (i) or (ii) of sub-section Notice and proper hearing in the matter, opportunity of
(1) or (2) of section 132, he may authorize any officer of central being heard to the person proceeded against to rebut
tax to arrest such person. allegations leveled against him.
Penalty provisions under GST: (2) The penalty is dependent upon totality of facts and
Penalty proceedings are quasi criminal proceedings. They are circumstances of the case.
based on prevalence of probability. Section 122 of the CGST Act (3) The penalty imposed is to be commensurate with the
specifies penalty provisions for offences committed under GST. degree and severity of breach of the provisions of the law
Sub-section (1) of section 122 provides that any taxable person or the rules alleged.
who has committed any of the offences mentioned in section (4) The nature of the breach is to be specified clearly in the
122 shall be liable to a penalty that shall be higher of: order imposing the penalty.
(1) Amount equivalent to tax evaded, fraudulently obtained as (5) The provision of the law under which the penalty has been
refund, availed as credit or not deducted or collected or imposed is to be specified.
short deducted or short collected; or Moreover, no substantial penalty is to be imposed for any minor
breach (where amount of tax involved is less than Rs.5000/-) of
(2) Amount of Rs.10000/-.
tax regulation or procedural requirements and in particular, any
Reduction and waiver of penalty in some cases: omission or mistake in documentation which is easily rectifiable
As per section 73 of the CGST Act, where any tax has not paid, and made without fraudulent intent or gross negligence.
short paid or erroneously refunded or where input tax credit Further, as prescribed under section 126(5), where a person
has been wrongly availed or utilized for any reason other than voluntarily discloses the circumstances of breach of the tax
reason of fraud or willful misstatement or suppression of facts law, regulation or procedural requirements to an officer prior
to evade tax and a notice has been issued to such person, if to discovery of the breach, the proper officer may consider
the person has paid tax, interest and penalty within specified the fact as mitigating factor when qualifying penalty for that
time from issuance of show cause notice, no penalty shall person.
be payable. Similarly, section 74 of the CGST Act provides for The provisions of this section are not applicable in case where
reduction of penalty in case of fraud or willful misstatement. penalty is specified as a fixed sum or as a fixed percentage.
Details of these provisions are as under: Provisions related to prosecution:
Amount of penalty applicable Section 132(1) of the CGST Act contains provisions related to
Date of payment
prosecution for certain offences. These provisions are as under:
of dues along In case of
with interest fraud, willful In other cases Amount of tax evaded or input tax Imprisonment with
under section 50 misstatement etc. credit wrongly availed or utilized or fine
Before issuance of 15% of tax Nil amount of refund wrongly taken
show cause notice Exceeds Rs.5 Crore 5 years with fine
Within 30 days 25% of tax Nil, except where Exceeds Rs.2 Crore but does not 3 years with fine
from issuance of self assessment Exceeds Rs.5 Crore
show cause notice tax or tax collected Exceeds Rs.1 Crore but does not 1 year with fine
and not paid exceeds Rs.2 Crore
within 30 days
Falsifies financial records or produces 6 months or with
from due date
fake accounts or prevents any officer fine or both
(rule 73(11)
from discharging his duties or destroys
Within 30 50% of tax Nil any material evidence or document
days from
Offence committed again 5 years with fine for
communication of
second and every
order
subsequent offence
After 30 days Higher of Higher of
Rs.10000/- or 100% Rs.10000/- or 10% Confiscation or detention of goods:
of tax due (Sec. of tax due. (Sec. If any person transports any goods or stores any such goods
122(2)(b) 122(2)(a) and sec. while in transit without invoice and a declaration, or supplies
74(a) or stores any goods that he has not recorded in his books of

17
ICAI GST Newsletter l August 2018

account, then such goods shall be liable for detention or seizure
along with any vehicle on which they are being transported.
When owner comes forward, such goods shall be released on
payment of applicable tax and 100% penalty or on furnishing
100% security. In case of exempted goods, penalty is 2% of
value of goods or Rs.25000/- whichever is less. When assessee
does not come forward, levy of penalty shall be 50% of value of
such goods and in case of exempted goods levy of penalty shall
be 5% of value of such goods.
Section 129 of the CGST Act provides for detention, seizure
and release of goods and conveyance in transit, while section
130 provides for confiscation of goods or conveyances and
imposition of penalty. Section 130 prescribes that the goods are
liable for confiscation, if any person:
• Supplies or receives any goods in contravention of any
provisions of the Act
• Does not account for any goods in the manner required
under the Act.
• Supplies goods that are liable to tax under the Act without
applying for registration.
• Uses any conveyance as a means of transport for carriage
of goods in contravention of CGST/SGST Act.
• Contravenes any provisions of the Act/Rules with the
intention of evading payment of tax.
In case of confiscation of the goods, option has been given to
the owner to pay fine in lieu of confiscation. Such fine shall
not exceed market price of confiscated goods and it shall be
in addition to tax and other charges payable in respect of such
goods.
The confiscated goods shall be released on payment of
applicable tax, penalty or fine.
Further, if the vehicle is found to be transporting goods without
e-way bill, such vehicle along with goods can be detained or
seized and would be released only on payment of appropriate
tax and penalty. If the owner comes forward to pay the penalty
and tax amount, he must pay 100% of tax payable and if he not
comes forward, penalty will be 50% of value of goods.
Here one notable point is that third proviso of notification No.
12/2018 dated 07.03.2018 specifies that “where the goods
are transported for a distance of upto fifty kilometers within
the State or Union Territory from the place of business of the
consignor to the place of business of the transporter for further
transportation, the supplier or the recipient, or as the case may
be, the transporter may not furnish the details of conveyance in
Part B of FORM GST EWB-01. “. Hence merely non-mentioning
of vehicle no. in part-B of e-way bill in such cases cannot be the
ground for seizure of goods. Allahabad High Court in case of VSL
Alloys (India) Pvt. Ltd. vs. State of U.P. and another held that
where assessee is not supposed to file part-B of e-way bill and
where all documents are accompanied by the goods, merely
non-mentioning of vehicle no. in part-B of e-way bill cannot be
the ground for seizure of goods.
18
ARTICLES
Necessity of mensrea for penalty and prosecution
Section 135 of the Act specifies that “in any prosecution for an
offence under this Act which requires culpable mental state on
the part of accused, the court shall presume the existence of
such mental state. but it shall be a defense for the accused to
prove the fact that he had no such mental state with respect
to the act charged as an offence in that prosecution.”Hence
mensrea is a necessary ingredient under this Act, the court shall
presume its existence and burden of proof to show its absence
is on accused. Culpable state of mind includes intention, motive,
knowledge of fact and belief in or reason to believe the fact. A
fact is said to be proved only when the court believes it to exist
beyond reasonable doubt and not merely when its existence
is established by a preponderance of probability. Mensrea is
not essential to attract penalty under this Act. It was classical
view that “no mensrea no crime”. There are some court rulings
which direct that “absence of mensrea can be taken as defense
available for any prosecution under the Act.” But several laws
in India and abroad, especially regarding economic crimes and
departmental penalties have created several punishments even
where the offences have been defined to exclude mensrea.
Intricacies related to penalty provisions
Where goods are supplied without payment of tax, the penalty
cannot be leviable when assessee has immediately paid the
tax with interest. In case of M/s. Xerox India Ltd. vs. State of
Karnataka, where dealer disputed tax liability on the basis of
judgment of apex court, but after receiving clarification from
apex court, assessee has immediately paid the tax with interest.
The Karnataka High Court held that penalty cannot be leviable
merely because it is lawful to do so. Hence penalty is not
justifiable in such cases.
Moreover, if the applicant has committed mistake while filing
GST registration, penalty cannot be imposed for non-filing of
GST return, and non-depositing the tax, if the applicant deposits
the tax and files GST return within two weeks of issuance
of correct registration certificate. In case of Modern Pipe
Industries vs. State of U.P. and Ors.,(2017) 84 taxmann.com 254
(Allahabad), it was held that at the time of migration to GST,
assessee has by mistake obtained registration as sole proprietor
instead of partnership firm. The Allahabad High Court directed
the department to issue necessary login id/password in the
name of partnership firm within a period of two weeks and the
corrected registration certificate within a week after and also
directed not to levy penalty if the applicant deposits the tax
and files GST return within two weeks of issuance of correct
registration certificate.
One notable point is that section 129 does not indicate manner
of payment of penalty. as per section 49(1), every deposit
made towards tax, interest, penalty, fee or any other amount
by a person by internet banking, RTGS, NEFT, or by using credit
or debit cards or any other prescribed mode shall be credited
to electronic cash ledger of such person. Hence penalty can
also be paid on GST portal maintained by the Government.
The Department cannot insist to pay the penalty only in cash
or by demand draft. But Input Tax credit cannot be utilized for
ICAI GST Newsletter l August 2018
 ARTICLES
payment of penalty.
Compounding of offence
Commissioner has granted power under GST to compound the
offence. Section 138 of the CGST Act specifies that compounding
can be done either at the time or before the prosecution on
payment of compounding amount. The compounding of
offence is allowed only after payment of tax, interest and
penalty involved. The lower limit for amount of compounding
is Rs.10000/- or 50% of tax whichever is higher and upper limit
is Rs.30000/- or 150% of tax whichever is higher. On payment
of compounding amount, no further proceedings under the
Act to be initiated and criminal proceeds shall stand abated. In
following cases, compounding under GST cannot be allowed:
(1) Second time compounding is not allowed in respect of
offences described in clause (a) to (f) and (i) and offence
described in clause (g), (j) and (k) of section 132(1). (3) Compounding is not allowed if impugned offence under
(2) Second time compounding is not allowed in respect of GST is also an offence under any other law.
other clauses of section 132(1) if value of supply exceeds (4) A person who has convicted under GST Act by court.
Rs.1 Crore.

reCenTly held evenTS under The aeGiS of indireCT

TaxeS CommiTTee

Certificate Course on GST at Delhi Certificate Course on GST at Kolkata

Seminar on GST at Gurugram Workshop on GST at Tinsukia

19
ICAI GST Newsletter l August 2018

GST fermenTinG GroundS
for liTiGaTion?
1. Prologue
India is celebrating the first anniversary of biggest tax reform
after Independence i.e. Implementation of GST Act. GST was
introduced in India with the main objective of One Tax One
Nation, Simplified Tax Structure, lower legal compliances and
reduction in litigations, transparency in tax structure and so
on. However, the same was introduced by the Government in
a haphazard manner, which resulted into the various glitches in
its implementation. The so called Gabbar Singh Tax or Good and
Simple Tax has found its presence in the life of an ordinary hawker
and peddler to a 1000 crores business tycoon. It was expected
that in the initial years there would be teething problems as
the law will take years to settle or fully implemented. No doubt
that the government has shown firm commitment to address
various issues and is has been proactive in taking the corrective
measures for its healthier implementation. For the better
transparency and interpretation government has issued various
circulars, notifications, public notices, FAQs etc. and amended
the rules several times. Even after the various amendments still
GST is yet to attain its ideal form. GST is suffering from various
imperfections like multiple tax slabs, complex tax structure,
complexity in tax returns and refund of taxes, complex rules
and procedures and so on. All these have resultedin the various
troubles to the tax payers and Indian economy suffered a great
setback.
2. Taxes and Litigations – A never ending story:
According to the economic survey 2018, more than two lakh
tax cases, including direct and indirect taxes were pending at
various appellate legal forums at all levels of judiciary across
the country which amounting to nearly 4.7% of the total Indian
GDP. This has not only pointed out the quantum of the dispute
but has also pointed out the complexities involved in the
Indian tax structure. The main reason for the increase in the
more litigation is a slow decision by the appellate authorities,
which not only increase the volume but quantum also. Delay
in decisions leads to issue of tax notices by the tax officers and
leave the final decision in the courts mainly when the demand
is of recurring nature for all subsequent years till the litigation
attains finality or is settled.
The economic survey also pointed out that nearly 65% of
the cases were lost by the department and the success ratio
of the department is continuously decreasing, which clearly
indicate that the officers are not taking the decisions which is
contradictory to the department, which creates unnecessary
burden on the tax payers, which leads to wastage of time
20
ARTICLES
and money. No doubt that, the way in which the GST law is
implemented, and developments are going on, it will aggravate
the problem of litigation in the coming days.
3. GST fermenting grounds for litigation?
Despite efforts of the government and commitments in the
last one year, GST law has witnessed many litigations and
disputes from its implementation stage to the introduction of
e-way bill system. Problems related to transition issues, non-
filling of returns, refunds of taxes, export and import duties and
complexities, penalties, e-way bill structures, Advance Rulings
and related to many more areas are still under litigations and
creating a scope for future dispute and litigations. A few areas
where the maximum litigations were filled are transitional input
credit of various cheeses imposed prior to the introduction of
GST, anti-profiteering, transitional credit, e-way bills etc.
No doubt that the government has put in best efforts to clarify
the issues to avoid litigations in the future, but no doubt that
clarifications through informal channels like tweets, e-fillers,
FAQs, press release etc. are not legally binding on either side i.e.
Neither to tax authorities (government) nor to the tax payers.
In many cases clarifications issued by the government or tax
authorities were not in accordance with the legal provisions
and contradictory to law. In various cases,Courts have even not
accepted the Budget Speech of the Finance Minister as binding,
since the same was not introduced or worded in the final Act
which was passed by the parliament. Therefore, in the days to
come, the scope of legal disputes and litigations are going to
increase as the law will be implanted to its full swing, including
audit, periodical and annual returns, full-fledged procedural
compliances etc. One such fermenting ground for litigations
is the Authority for Advance Ruling (AAR), although the main
motto behind this is to reduce litigations but it has often
turned out to be on the contrary. In this article we have tried to
enumerate the basic procedure for advance rulings under the
GST, Challengeand reforms required to reduce the litigations
around GST.
4. Rules for Advance Ruling, Appeal and Revisions
The concept of the advance rulings is not new under the
Goods and Services Tax (GST) law. Advance rulings are aimed
to bring clarity in determining the tax liability well in advance
for the assessee and plan his transactions accordingly. Further,
it aids in avoiding litigations later, which can be costly and
time consuming. The main objectives of setting authority for
advance ruling are;
• Provide a certainty in assessing the tax liability in advance,
ICAI GST Newsletter l August 2018

in relation to an activity proposed to be undertaken by the
applicant;
• Reduce litigation;
• Pronounce ruling expeditiously in a transparent and
economical manner;
• Attract FDI
Advance ruling means a decision provided by the Authority
or the Appellate Authority to an applicant on matters or for
questions specified in his application, in relation to the supply
of goods or services or both being undertaken or proposed to
be undertaken by the applicant
The Provisions relating to Advance ruling are contained in
Chapter XVII, Section 95 to 106 of the CGST Act.
Section 95 of the CGST Act defines applicant any person
registered or desirous of obtaining registration under this Act,
which applies that any person who has obtained registration or
is desirous of the taking registration may can apply for Advance
ruling.
„ Matters on which Advance Ruling can be sought:
 Classification of any goods or services or both;
 Applicability of a notification issued under the provisions of
this Act;
 Determination of time and value of supply of goods or
services or both;
 Admissibility of input tax credit of tax paid or deemed to
have been paid;
 Determination of the liability to pay tax on any goods or
services or both;
 Whether applicant is required to be registered;
 Whether any particular thing done by the applicant with
respect to any goods or services or both amounts to or
results in a supply of goods or services or both, within the
meaning of that term.
It is pertinent to note here that, the questions regarding the
determination of the place of supply cannot be raised with
the AAR or Appellate Authority for Advance Ruling (AAAR) as
confirmed in one of the recent Advance ruling order discussed
later in this article.
„ Applicability and Scope of AAR:
Section 96 provides that, the AAR and AAARshall be constituted
under the respective State Goods and Service Tax Act. This
signifies that the ruling given by the AAR and AAAR will be
applicable only within the jurisdiction of the concerned state or
union territory. Since the Advance ruling authorities are State
Specific, the questions on determination of the place of supply
cannot be raised with the AAR or AAAR.
Section 103 envisages that order of advance ruling shall be
binding only on the applicant who had sought it and the
ICAI GST Newsletter l August 2018
ARTICLES
concerned officer or the jurisdictional officer in respect of the
applicant.
„ Procedure for obtaining Advance Ruling, Appeal &
Revision:
 Advance Ruling
Any applicant may apply for an advance ruling electronically
in form GST ARA -01, stating the question on which advance
ruling is sought along with the relevant documents as may
be required. Application should be accompanied by a fee of
Rs 5000/-.
Authority on receipt of an application shall send a copy of it
to the concerned jurisdictional officer of the applicant and
call for all relevant records. Thereafter the authority may
verify the application along with the records and pass an
order either admitting or rejecting the application.
The application shall not be admitted if the question raised
is already pending or decided in any proceedings in the
case of an applicant under any of the provisions of CGST
Act. The application may be rejected only after an giving an
opportunity of being heard to the applicant and by way of a
speaking order giving along with the reasons for rejection.
Once the application is admitted, the AAR shall pronounce
ruling within 90 days of receipt of application.
If there is a difference of opinion between the two
members of AAR, they shall refer the point or points on
which they differ to the AAAR for hearing the issue. It shall
be deemed that no advance ruling can be given in respect
of the question, if the members of AAAR are also unable
to come to a common conclusion in regard to the point(s)
referred to them by AAR.
 Appeal against Advance Rulings:
An aggrieved applicant or the concerned jurisdictional
officer may file an appeal against the advance ruling
pronounced to AAAR within 30 days from the date on
which the ruling sought to be appealed is communicated.
The time period can be extended further by 30 days. The
aggrieved applicant shall file an appeal in GST ARA-02 along
with a fee of Rs. 10,000/.
Where the appeal is preferred by the concerned
jurisdictional officer the same shall be filed in in Form GST
ARA-03 and no fee shall be payable.
The AAAR shall pass the order within 90 days from date of
filing of Appeal.
 Revision of Advance Rulings:
The authority or the Appellate Authority may amend any
order passed by it, so as to rectify any error apparent on
the face of the record, on its own accord, or is brought
to its notice by the concerned jurisdictional officer or the
applicant or the appellant within a period of 6 months from
21

the date of the order.
However, without giving an opportunity of being heard, no
rectification that has the effect of enhancing the tax liability
or reducing the amount of admissible input tax credit shall
be made.
Where the AAR or AAAR finds that advanceruling
pronounced has been obtained by the applicant or the
appellant by fraud or suppression ofmaterial facts or
misrepresentation of facts, it may, by order, declare such
ruling to be voidab-initio, and all the provisions of this CGST
Act or the rules shallapply to the applicant or the appellant
as if such advance ruling had never been made
It is important to note that, the assesee cannot file an
appeal against the AAR or AAAR order in High Court and
Supreme Court.
5. Challenges and Reforms:
AAR has been set up in all the states and as much as 111
advance rulings were issued till 5th August 2018, reported in
TIOL. Many of them involve some important issues, including
the ones like recovery from the employee for canteen services,
outdoor catering service provided to factory owner, supply of
goods with brand name or otherwise, supplies being composite
or mixed, etc. Given the budding stage of GST law, the questions
brought before AAR and the rulings, provide some insight into
divergent practices, the perspective of the department and
interpretation of various provisions of the youngest tax law.
Moreover, it is evident through the recent order of Advance
rulings that there are various challenges before the government
and require various reforms to achieve the desire result of the
AAR mechanism.
„ Contradictory ruling of two states one similar issue:
In the recent ruling given by the State specific AAR, it is
witnessed that the two States have given the contradictory
ruling on the similar issues, which creates confusions
between the tax payers especially when the taxpayer
operates across different States.
In the case of Giriraj Renewables Pvt Ltd, (2018-TIOL-
12-AAR-GST)the Karnataka AAR held that a contract for
construction of a solar power plant is not a composite
supply and hence photovoltaic modules should be taxable
at 5% and other items at their respective GST rates, whereas
Maharashtra AAR in the case of Fermi Solar Farms Pvt Ltd
(2018-TIOL-17-AAR-GST) held it to be a works contract of
immovable property and taxable at 18%.
In another case of Sino Resources (2018-TIOL-76-AAR-
GST),Andhra Pradesh AAR has not accepted the application
on the transitioning clean energy cess stating that the
issue is not covered in the scope of AAR. Whereas the
Maharashtra AAR in the case of Kansai Nerolac Paints Ltd
(2018-TIOL-09-AAR-GST) has held that Krishi Kalyan Cess
22
ARTICLES
credit cannot be transitioned.
The list of such issues where different AAR has framed the
different views goes on and creates confusions in the mind
of tax payers and snags in tax compliances.
Suggested Reforms: National Advance Ruling
Authority, which would be a centralized Authority
similar toerstwhile tax regime to be constituted.
Section 103 of CGST Act may be amended to provide
that, the Advance Ruling pronounced in one State
should be binding on other States as well.
„ An appellate mechanism for filing appeals against AAR
rulings
An appellate mechanism for filing appeals against AAR
rulings is not yet in place. As there is still no mechanism
for filing appeal against AAR, the tax payers have no other
option to follow the same because none following the
advance ruling will lead to intentional tax evasion, which
maylead to heavy penalty.
Suggested Reforms: The provisions contained in
Section 100 of the CGST Act to be implemented at
the earliest and National Appellate Advance Ruling
Authority to be constituted.
„ Multiple authorities for AAR (State wise)
There is a separate AAR in each State as there isa separate
GST Act and rules for each State. An assessee cannot
squarely apply the advance ruling obtained in one State to
his business practice in another State as it is not binding on
the other state. This will lead to the delicacyof the work as
even the matter is covered by some other state still one has
to file the application on the similar issue. Such decisions
among AARs of different States opens a Pandora’s box for
businesses with multi-State presence on what final tax
position to take.
Suggested Reforms : National Advance Ruling
Authority, which would be a centralized Authority
similar toerstwhile tax regime to be constituted.
Section 103 of CGST Act may be amended to provide
that, the Advance Ruling pronounced in one State
should be binding on other States as well.
„ Ambiguity in Law:
The very purpose of the Advance Ruling is to bring clarity on
various tax issues and reduce litigations. Although Advance
rulings have been given in cases like Battery sold with
inverter is a mixed supply or not, as the usage of the battery
varies from purpose to purpose or whether a water bottle
ICAI GST Newsletter l August 2018

can be classified as a storage container or a water bottle,
the ambiguity continues to prevail around these issues.
Since the tax rate is different, the assessees’will approach
the AAAR for further clarity. Since this is an ambiguity in the
law, there cannot be any clear guidelines, and everyonewill
try to interpret the same in theirfavour, resulting in further
litigations.
Suggested Reforms: National Advance Ruling
Authority, which would be a centralized Authority
similar toerstwhile tax regime to be constituted.
Section 103 of CGST Act may be amended to provide
that, the Advance Ruling pronounced in one State
should be binding on other States as well.
„ Composition of the AAR:
The AAR team consists one member each from Central and
State government. The members of AAR are of the rank
of Joint Commissioner or above. As since they are from
the tax department, their decision or rulingis likely to be
with the biased mind. This also evident from the, recently
pronounced AAR orders wherein majority of them were in
more in favour of the revenue.
Suggested Reforms: The team of AAR should include
one judicial member or setting up a National AAR with
judicial member where centre is to be considered as
national level authority.
„ Rejection of Application for Advance Rulings:
In few advance ruling orders, it has been decided that
the matter is not covered under the AAR or AAR are not
authorized to give any rulings on the issue. In the case of
M/s Pon Pure Chemical India Pvt. Ltd. (2018-TIOL-52-AAR-
GST) Gujarat AAR has rejected the application stating that
“As the ‘place of supply’ is not covered by Section 97 (2) of
the Acts, this authority is helpless to answer the questions
raised in the application, as it is lacking jurisdiction to
decide the issues and Issue of High Sea Sale falls in the
domain of Customs and not under the Goods and Services
Tax.” This will lead the issue being left unresolved and boost
the scope for litigation.
Suggested Reforms: All issues related to GST should
be brought under the ambit of Advance ruling.
„ Assessee Specific Advance Rulings:
The Advance rulings are specific to each Assesee and arenot
binding on other assessees’ and/or jurisdictional officers.
Where the facts of the case are same, this will lead to
duplicacy of rulings and higher quamtum of applications
ICAI GST Newsletter l August 2018
ARTICLES
pending with AAR, which would inturn lead to delay in AAR
orders.
Suggested Reforms: The AAR order to be binding on
other Assessee and/or Jurisdictional officers unless
otherwise the fact of the case are different.
6. Conclusion:
The Advance Ruling Systemis introduced and implemented
to smoothen the dispute resolution process and to reduce
the litigations. Moreover, the global experience shows that
during the initial year of GST implementation tax litigations has
drastically shoot up. Looking at the last one-year experience, it is
very unlikely that the India will be an exception to this. Many gray
areas like backward area incentives, state government incentive
schemes, audit and tax assessments, different advance rulings
by different states and countries, difference state GST Act and
rules mainly on e-ways, etc. will leads to more tax litigations.
The government is looking keen to simplify the tax law and
make it user-friendly, which not only reduce the litigations but
also make it as a part of the ease of doing business policy.In
an Interview, Finance Secretary HasmukhAdhia said that the
proposal of setting up centralised AAR is under consideration.
Looking on the recent advance rulings, which are more in
favour of the revenue or creating confusions, the majority of
the taxpayers are now choosing not to file an advance ruling as
it will further create litigations in spite of giving any clarity on
the same. Therefore, the way in which the AAR mechanism is
functioning, it will over the period remain as the elephant teeth
only and would not serve the purpose unless and until the new
changes are brought into it. Moreover, the government is under
its commitment to reduce the litigation in GST regime.
In short, there have been of lots of ebb and flow, and one
can dispute that not everything is as sunny and shiny as the
lawmakers wants us to believe. With a second wave of reforms
coming in as an amendment to GST law, it goes without saying
as the law evolves itself, it is going to open the Pandora Box
of litigations and is going to be the new goose that lays golden
eggs for the professionals.
23
forTh CominG evenTS under The aeGiS of
indireCT TaxeS CommiTTee
Title of the Event : Certificate Course on GST
6th October, 2018 Contact Details : Ernakulam Branch of ICAI
Place : Ernakulam • CPE Hours : 30 Hours Phone: 484-2396238/2396258/
2372953
Email: ernakulam@icai.org
Title of the Event : Certificate Course on GST
Contact Details : WIRC of ICAI 6th October, 2018
Phone: 022-33671400 /1500 Place : Mumbai • CPE Hours : 30 Hours
Email: wircevents@icai.in

Title of the Event : Certificate Course on GST

16th November, 2018 Contact Details : EIRC of ICAI
Place : Kolkata • CPE Hours : 30 Hours Phone: 91-33 30211104
Email: eircevents@icai.in

Title of the Event : Residential Refresher Course on GST

Contact Details : Bangalore Branch of SIRC of ICAI 11, 12, and 13th October 2018
Phone: (080) 30563513/3500 Place : Bangalore • CPE Hours : 16 Hours
Email: blrregistrations@icai.org

The ICAI-GST Newsletter being the property of The Institute of Chartered Accountants of India published from ICAI
Bhawan, Post Box No. 7100, Indraprastha Marg, New Delhi-110002 and Printed from M/s CDC Printers Pvt Ltd, Tangra
Industrial Estate- II ( Bengal Pottery), 45, Radhanath Chaudhary Road, Kolkata-700015. Compiled by Indirect Taxes Committee.